What information is worth noting as Sunac China completes the restructuring of its overseas debt, resolving a total of approximately 90 billion yuan of debt risk over a period of 18 months?

Country Garden Chinas stock rose nearly 7% The overseas debt restructuring was officially implemented As of November 21, Country Garden China (01918HK) rose by 687% According to the announcement last night, all conditions for the companys overseas debt restructuring have been met and it officially took effect on November 20 The company stated that with the completion of the restructuring of domestic and overseas public market debts, Country Garden China has resolved approximately 90 billion yuan of debt risks, and there will be no rigid debt repayment pressure in the overseas public market for 2-3 years After a period of 18 months, Country Garden China (HK01918, stock price of 2330 Hong Kong dollars, market value of 12696 billion Hong Kong dollars) successfully announced the completion of its overseas debt restructuring On the evening of November 20, Country Garden China announced that all conditions for the overseas debt restructuring of the company have been met and it officially took effect on November 20, 2023 This means that Country Garden has become the first large-scale real estate enterprise to complete all processes of domestic and overseas debt restructuring According to incomplete statistics from the Daily Economic News, since the second half of 2021, more than 50 listed real estate companies have initiated overseas debt restructuring Although Country Garden was not the first to encounter difficulties, it was the first large-scale real estate enterprise to complete domestic and overseas debt restructuring It is reported that the scale of Country Garden Chinas overseas debt restructuring is approximately billions of US dollars These existing debts will be replaced by six new US dollar bonds, mandatory convertible bonds, convertible bonds, and Country Garden service equity, with respective values of 57 billion US dollars, 275 billion US dollars, 1 billion US dollars, and 775 million US dollars, to complete debt restructuring Influenced by the positive news, on November 20, the opening price of Country Garden China rapidly expanded to a 10% increase At the close of the day, the stock price of Country Garden China was 2330 Hong Kong dollars per share, a 591% increase After a period of 18 months, Country Garden Chinas overseas debt restructuring was completed, resolving approximately 90 billion yuan of debt risks in its entirety

Rongchuang Completes Domestic and Overseas Debt Restructuring, Stock Price Soars. Companies Need to Handle Building Delivery and Other Issues.

Rongchuang should be the first large-scale real estate enterprise to complete the entire process of domestic and international debt restructuring.

I hope Rongchuang can cherish this opportunity, complete building delivery properly, and not disappoint consumers.

Give the houses that belong to others to their owners, and even if there are any agreed payments, they should not default.

After more than 500 days, the overseas debt restructuring is finally completed. This should give Rongchuang some relief in terms of debt.

Since 2021, there have been about 50 listed real estate companies initiating overseas debt restructuring.

Many heavily indebted real estate companies have been unable to complete debt restructuring.

This is a hard-won opportunity for Rongchuang.

Today, Rongchuang’s stock price soared because the domestic and overseas public market debt restructuring has been completed, and there will be no rigid debt repayment pressure in the overseas public market for the next 2-3 years.

This provides some time to alleviate operational pressure and carry out various self-rescue measures.

There are not many real estate companies that can survive in the future. This kind of opportunity is truly hard to come by.

If you want to continue operating, you must quickly deal with various past messes and use the money to restore consumer confidence and build good houses.

Compensation and restitution should be done properly.

Rongchuang experienced increased liquidity tension in the second half of 2021 and debt defaults in May 2022.

The company has been making efforts to rescue itself, collaborating with AMC institutions, continuously replenishing funds through equity placements, loans from major shareholders, and asset disposals, with a total of over 30 billion yuan recovered.

On January 3, 2023, Rongchuang’s 16 billion yuan domestic bond extension plan was approved by an investor conference.

On March 28, 2023, Rongchuang announced a $9.048 billion overseas debt restructuring plan.

On November 20, 2023, Rongchuang announced that all conditions for the overseas debt restructuring had been met.

As of the end of October this year, Rongchuang China has achieved a cumulative contracted sales amount of approximately 75.78 billion yuan, a year-on-year decrease of 50.49%.

The cumulative contracted sales area is approximately 5.403 million square meters, with an average contracted sales price of approximately 14,030 yuan per square meter.

After completing the debt restructuring, Rongchuang can resume normal operations and properly carry out building delivery.

Rongchuang completed delivery of over 180,000 residential units last year, and another 205,000 units in the first ten months of this year.

This year, the company plans to deliver 300,000 units.

What everyone is most concerned about is the progress of Rongchuang’s building delivery.

The authorities mainly hope that many real estate companies can honestly complete building delivery without liquidation.

Don’t engage in shady dealings, otherwise it will definitely end up like Evergrande, with no hope of recovery in the future.

Only companies that successfully complete debt restructuring and handle building delivery and various problems well will have a chance of survival.

Responsibility of Sunac and its performance in asset sales, delivery of properties, and bond restructuring

Sunac can be considered one of the most responsible among these real estate companies that have experienced scandals.

Of course, it is mainly because of its team members. Evergrande was busy deceiving people before its scandal, claiming to sell properties at a 30% discount, but never actually intending to deliver them. They could deceive as many people as possible with that 30% discount. The promise of delivering the properties was only displayed on banners and in slogans.

On the other hand, Sunac has actively sold off assets that needed to be sold, while delivering the properties that could be delivered. Last year, they delivered 180,000 units, and this year they have already delivered over 200,000 units, aiming for a total of 300,000 units for the year.

At the same time, they have also shown a relatively proactive approach to bond restructuring.

Therefore, since the scandal until now, a period of 500 days, they have completed the restructuring, which is quite impressive among a group of underachievers.

However, I hope Sunac gives priority to resolving the issues with the Lijun project. It is deeply concerning and has a negative impact. Moreover, regarding the incident of assault, although the police have taken action, I believe Sunac needs to make some internal accountabilities as well.

Evergrande’s Debt Restructuring Crisis

Once a company of this scale like Evergrande goes completely bankrupt, it will trigger a series of chain reactions, even causing a systemic crisis macroscopically.

However, for this reason, domestic debts of these companies often receive a great deal of leniency. Banks may provide extensions for their debts, the central bank may provide special loan support plans, the government may facilitate local credit enhancement for the company by providing credit easing tools, or directly lower the threshold for issuing bonds, allowing these companies to temporarily survive by relying on debt.

Of course, only companies with a background in state-owned enterprises, such as city investment corporations, or large companies that can cause chain reactions, will receive support from various institutions. However, due to the hidden inflation risks brought about by “borrowing new to repay old” and “living on debt,” it will ultimately be paid for by the people nationwide.

Compared to domestic debt, resolving overseas debt is much more difficult. Overseas investors are not concerned with the domestic systemic risks; what they are more interested in is the return on investment. Therefore, they usually do not grant special leniency to the borrower in terms of repayment period.

So, in order to avoid bankruptcy, borrowers generally have to borrow from third parties at higher interest rates in order to meet the goal of living on debt. However, compared to domestic debt, refinancing the overseas debt can be very costly, which may accelerate the bankruptcy process of the company.

In China, refinancing may not incur a significant cost increase. For example, last year, Guizhou’s leading city investment corporation, Zunyi Daobridge, obtained a 20-year unconditional extension from the bank, with the amount reaching 15.6 billion.

Similarly, in various regions from last year until now, the threshold for issuing bonds by city investment corporations has been lowered, allowing them to continue financing at low interest rates. Many of the fixed-income products you purchased, which yield around 3%, are used to invest in these types of bonds. Of course, the risk of bankruptcy is very low, as another issuance can be made before the bond matures to repay the previous one.

However, overseas debt cannot enjoy such preferential treatments; the refinancing cost for companies will only continue to rise. For example, Suning, which experienced a debt crisis this year, saw its financing cost for overseas debt rise from 5%-8% five to six years ago to the current 12%-16%.

The same goes for Evergrande. The financing cost for its soon-to-mature overseas debt has already reached 7.5%. And from publicly available information, it can be understood that the bond was issued in November 2019, which means that Evergrande’s financing cost reached 7.5% four years ago.

Now, after experiencing a bleak period of the real estate market downturn and several debt defaults, Evergrande’s credit rating has been downgraded multiple times, and its financing cost is likely far higher than the level of 7.5%.

This debt restructuring of Evergrande is still carried out through continued bond issuance and replacement, and its interest cost may have already surpassed that of Suning mentioned above. Although the debt restructuring temporarily eases Evergrande’s risk of a complete collapse, it also increases the risk of future defaults, especially in an environment where real estate sales are already in a downturn.

Therefore, although Evergrande has completed its debt restructuring nominally, in reality, most of its debts are still managed through “borrowing new to repay old,” and it will face an even greater risk of bankruptcy in the future.

Rongchuang completes debt restructuring and resumes operations.

Undoubtedly, this is a booster shot for major real estate companies that are caught in a whirlpool!

This means that Rongchuang has become the first large-scale real estate company to complete the entire process of domestic and foreign debt restructuring, effectively resolving about 90 billion yuan of debt risks.

Debt restructuring is a means of “buying time with space.” For troubled real estate companies, after obtaining precious time, they still need to quickly restore normal business operations, improve their current situation, and return to the right track. This includes revitalizing existing projects, ensuring project construction and delivery by introducing capital partners for existing stalled projects. Currently, ensuring project delivery is still the bottom line for real estate companies, and the government has also introduced various policies to provide support. Under these favorable policies, troubled real estate companies still need to seize the opportunity, actively resume work and production, and gradually restore normal business operations.

  1. Revitalize existing projects and ensure project delivery.

For existing stalled projects, troubled real estate companies need to quickly introduce capital partners to ensure successful project construction and guarantee timely delivery. Currently, project delivery is still the bottom line for real estate companies, and the government has introduced various policies to provide support. Under these favorable policies, troubled real estate companies need to seize the opportunity and actively resume work and production to gradually restore normal business operations.

  1. Accelerate sales and promote continuous enterprise development.

Troubled real estate companies should seize the window period of “city-specific policies” and accelerate the sales and disposal of well-positioned projects to quickly retrieve funds. Only with continuous sales and cash flow can the ability to repay debt be enhanced.

  1. Restore organizational functions as soon as possible.

To further reduce costs, some troubled companies have made significant adjustments to their organizational structure and significant optimization of personnel structure, resulting in a severe shortage of personnel and stagnation in some operational functions. When the company’s operations improve to a certain extent, troubled real estate companies need to quickly adjust and restore personnel and improve the organizational structure. Only then can related business activities be effectively carried out, which will help the company resume normal operations.

Now, Rongchuang’s operating fundamentals will undergo a comprehensive improvement. There will be no rigid debt repayment pressure in the overseas public market for the next 2-3 years. Debt restructuring also contributes to the increase in equity capital, significantly repairing the balance sheet. At the same time, the company’s future work on project delivery will be strongly guaranteed, creating better conditions for business recovery.

According to the restructuring plan, the existing debt of approximately $10 billion USD owed to creditors will be replaced by new notes, mandatory convertible bonds, convertible bonds, and Rongchuang’s stock, with respective values of $5.7 billion USD, $2.75 billion USD, $1 billion USD, and $775 million USD.

The three types of products, new notes, mandatory convertible bonds, and convertible bonds, are expected to be listed on the New Exchange on November 21. Rongchuang’s shares in the company have been transferred to the planned creditors.

Among real estate companies, Rongchuang can be regarded as a benchmark for debt restructuring. Although Rongchuang was not the first real estate company to encounter difficulties in the industry, it has always strived to turn itself around through continuous efforts, and its debt restructuring process has been kept open and transparent.

During the debt restructuring process, major shareholder Sun Hongbin also demonstrated his entrepreneurial spirit. For example, he provided a $450 million USD interest-free loan to the company using his own funds (all of his personal dividends since the company went public), supporting the company through its most difficult times. In this debt restructuring, Sun Hongbin also took the lead in converting his loan into mandatory convertible bonds under the same conditions as other creditors, truly showing solidarity with them.

What impressed the creditors even more than the restructuring plan was Sun and the management team’s proactive attitude throughout the process.

The help that debt restructuring provides to Rongchuang is evident. However, in order to truly overcome difficulties and resume normal business operations, Rongchuang still needs to make efforts to stimulate sales.

From the perspective of the stock market, the worst moment for the real estate industry has passed. However, in order for the real estate market to truly achieve a “soft landing,” there is still one essential step remaining—when will housing sales fully recover.

Finally, best wishes to Rongchuang and best wishes to Chinese real estate companies!

Real Estate Financial Pressure

The current state of the real estate market is obvious, and it is indeed difficult to complete overseas debt restructuring under such circumstances.

It should be noted that:

Firstly, debt restructuring is not a cancellation of debt; the money owed still needs to be repaid. It is only delayed through debt substitution, which means borrowing new money to repay old debt. By extending the overall debt maturity, there is no need to worry about principal repayment in the short term. However, in the long run, it still creates enormous pressure on funding costs and financial leverage. In addition, debt-to-equity swaps in real estate companies are not new; they can be considered as the consideration paid by creditors.

Secondly, the financial risks have only been temporarily resolved, while operational risks still face significant uncertainties. After all, for a company to continue operating, it needs a steady flow of operating cash flow to cover costs and maintain profits, as well as sustain and expand its business. However, the overall environment for real estate companies is still unfriendly, and large real estate companies face difficulties in transforming and upgrading. After the tide of the times, it is difficult for them to overcome their current operational challenges relying solely on themselves.

Currently, in response to continuous favorable policies for real estate companies and markets, from a comprehensive perspective, I believe that the central idea is to provide support, complete delivery of housing, and avoid systemic risks. That’s about it.

It is unlikely for the real estate industry to go through another 20 years of high-speed development path as it did before, so I suggest everyone approach it cautiously and optimistically.

Rongchuang’s operation returns to normal after debt restructuring

Personal opinion: “Rongchuang is the best real estate company to go ashore”

After 18 months, Rongchuang has become the first large-scale real estate company to complete the entire process of domestic and international debt restructuring.

Rongchuang China’s stock price has surged nearly 27%.

Rongchuang’s debt risks have been basically eliminated, and its operations are accelerating their recovery.

Today, Rongchuang has driven up the stocks of real estate related companies, leading to a completely bullish market.

The recent launch of the secondhand home exchange program in our country is indeed a boost for the market. It can activate the circulation of funds.

The real estate industry should be able to get out of the slump.

The above are personal opinions only.

Answer: The possible translations for the subheading may be “Explanation and Tape” or “Explanation Tape” or “Tape Explanation” or “Explanation”.

Explanation (x)

Tape (√)

The problem of housing should be resolved

Dear [government],

In the future, please refrain from using violence. It is promised that the money owed to the people should be refunded, and the houses promised to the people should be delivered.

Please make a concerted effort to decrease the number of abandoned and unfinished buildings. This will be beneficial in every aspect.

May there be no more abandoned and unfinished buildings in the world, so that people can purchase homes without worry.

Progress of China Vanke’s Overseas Debt Restructuring

This is not surprising news. Since the beginning of this year, China Vanke’s overseas debt restructuring has been progressing continuously:

On March 28th, China Vanke’s overseas debt restructuring made significant progress. According to its announcement, a restructuring support agreement has been reached with the overseas debt holders' group for the restructuring of $9.048 billion in overseas debt. China Vanke intends to seek broader support from existing debt holders for the overseas restructuring plan, which includes convertible bonds, mandatory convertible bonds, conversion into partial equity in China Vanke’s services, and the substitution of new notes.

On September 18th, China Vanke announced the latest progress in its overseas debt restructuring. The overseas debt restructuring plan was approved by a large majority of votes, with a voting rate of 99.75% from a total of 2,019 creditors. The approval rate for the total debt amount was 98.3%. The announcement also revealed that there was a high intention among creditors to subscribe to the mandatory convertible bonds. China Vanke plans to increase the maximum limit of mandatory convertible bonds in the US dollar debt restructuring from $2.2 billion to $2.75 billion. Taking into account other debt-to-equity conversion options in the comprehensive debt restructuring plan, it is estimated that China Vanke’s total debt reduction through debt-to-equity conversion will exceed $4.5 billion.

According to China Vanke’s interim performance report for 2023 released on August 30th, as of June 30th, 2023, the unaudited total assets amounted to CNY 1,069.971 billion, while the total liabilities reached CNY 1,002.739 billion, resulting in an asset-liability ratio of 93.7%.

Compared to other real estate companies, China Vanke has indeed shown great sincerity in its overseas debt restructuring efforts and has made efforts in financing to seek new capital injection.

For example, in December 2022, China Vanke completed the equity transfer transaction for the Shanghai Dongjiadu project financing cooperation with China Huarong, Shanghai Pudong Development Bank, CITIC Trust, and other parties. According to the cooperation agreement, China Huarong, a banking consortium led by Shanghai Pudong Development Bank composed of six banks (Shanghai Pudong Development Bank, Bank of Shanghai, Shanghai Rural Commercial Bank, Bank of Communications, Industrial Bank, and Bank of Beijing), and CITIC Trust, among others, jointly injected funds into the Shanghai Dongjiadu project, with a total additional financing amount exceeding CNY 12 billion, which will be used for the overall development, construction, and operation of the project. At the same time, Dongfang Assets also reached a financing cooperation agreement with China Vanke for the Wuhan Taohuayuan project.

Moreover, China Vanke has indeed shown some hope in terms of delivering completed buildings, indicating a gradual improvement in its funding situation:

China Vanke completed the delivery of over 180,000 residential units last year and delivered an additional 205,000 units in the first ten months of this year. It aims to deliver a total of 300,000 units by the end of this year.

In combination with the recent intensive policies issued by the government regarding real estate companies' financing, with the support of the government, the market still holds positive expectations for China Vanke’s development:

On November 17th, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly held a seminar with financial institutions to discuss key work such as real estate finance, credit distribution, and debt risk resolution of financing platforms. Regulatory authorities have frequently stated their determination to maintain the stability of key financing channels such as credit, bonds, and equities for real estate companies. Market expectations are that various financial institutions will increase their support for real estate industry financing, and more financial policies to support the real estate sector are expected to be implemented.

However, China Vanke’s future ultimately depends on the market’s willingness to pay and on sales recovery and growth. The recent incident of physical assault on homeowners of abandoned buildings in Henan will greatly affect the confidence of homebuyers. Regardless of how much progress China Vanke claims to have made in completing buildings, let alone the fact that delivering completed buildings is something a real estate company should do with the buyers' funds, just based on the fact that there were physical assaults on homebuyers who were monitoring their property through mobile phones at the abandoned buildings, every person considering buying a China Vanke property should carefully consider if they can withstand such violence.

Especially considering that the video statement from the assaulted couple has been taken down by various platforms, and the official media has remained silent, who is willing to become the next victim?